Quote 4: True, what you said was a radical change and was taken at face value though. Making the whole world into turn based mode is extreme and dumb. For example in co-op combat can be started accidently walking into hostile npcs while another player could be selling crap in another town.
I'll join your conversation for this moment... my original suggestion was not the whole world, but some area. For example if you're starting a fight with one character in the Chapel on the first floor, the Chapel first floor is the turn-based area now. Plus we have the retreat button now. And I'm not voting for removing it. Finally as I wrote at the end in OP they may try to give the player a moment at the start of every fight to decide if he's engaging with all characters or not.
As for how much work that all would actually need: it seems they already have half of the scripts they would need, since they created that enforced non-combat turn-based mode.
Diving into more details I'm seeing semi-perfect implementation like this:
1. We have the "combat bubble" with combat turn-based mode on inside of an area with non-combat turn-based mode on.
2. As soon as the fight starts the game drags all PCs and NPCs inside of the area in a turn-based mode ignoring any kind of circumstances (stealth, friendly, unconscious e.t.c. shouldn't matter).
3. As soon as the fight starts all PCs and NPCs in the "combat bubble" get their surprised or not state and roll for initiative ignoring such circumstances as being in stealth or friendly.
4. PCs out of the "combat bubble", but inside of the turn-based area can use the retreat button to run away from the fight and exit the mode.
5. If we have a PC miles away when we switch to him we should be asked if we are willing to enter the turn-based mode on him as well or not. That should also work for coop as "Your party-member is engaged in a fight. Turn on the turn-based mode or not? - Yes/No".